Chap 07: E-procurement

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Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007

CHAPTER 7E-PROCUREMENT

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Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007

Learning outcomes Identify the benefits and risks of

e-procurement Analyze procurement methods to

evaluate cost savings Assess different options for integration of

organizations’ information systems withe-procurement suppliers.

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Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007

Management issues What benefits and risks are associated

withe-procurement?

Which method(s) of e-procurement should we adopt?

What organizational and technical issues are involved in introducing e-procurement?

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Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007

How important is procurement?

We estimate that for every dollar a company earns in revenue, 50 cents to 55 cents is spent on indirect goods and services – things like office supplies and computer equipment.That half dollar represents an opportunity: By driving costs out of the purchasing process, companies can increase profits without having to sell more goods. Hildebrand (2002)

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Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007

What is e-procurement?

The electronic integration and management of all procurement activities including purchase request, authorization, ordering, delivery and payment between a purchaser and a supplier

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Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007

The 5 rights of E-procurement

at the right price delivered at the right time are of the right quality of the right quantity from the right source.

Baily et al., 1994

Figure 7.1 Key procurement activities within an organization

Figure 7.2 Electronic procurement systemSource: Tranmit plc

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Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007

Types of procurement

Production-related procurement Non-production related procurement

How items are bought: Systematic sourcing Spot sourcing

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Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007

Drives of e-procurement

Cost reduction Enhanced budgetary control Elimination of administrative errors Increasing buyer’s productivity Improving information management Improving the payment process

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Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007

Risks and impact of e-procurement Organizational risks

Need to redeploy staff Technology risks

Integration with existing financial systems

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Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007

Implementing e-procurement Stock control system CD/web-based catalogue E-mail/workflow system Order-entry on web site Accounting systems ERP systems

Figure 7.3 Use of different information systems for different aspects of thefulfilment cycle

Figure 7.4 E-mail notification of requisition approvalSource: Tranmit plc

Figure 7.5 Document management software for reconciling supplier invoice with purchase order dataSource: Tranmit plc

Figure 7.6 The three main e-procurement model alternatives for buyers

Table 7.6 Assessment of the procurement model alternatives for buyers

Figure 7.7 Integration between e-procurement systems and catalogue data

Figure 7.8 An online catalogue of items for purchaseSource: Tranmit plc

Figure 7.9 Ford supplier portal provided by CovisintSource: Covisint.com

Figure 7.10 Supplier Route to Government Portal (www.supply2.gov.uk)

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Dave Chaffey, E-Business and E-Commerce Management, 3rd Edition © Marketing Insights Ltd 2007

Government marketplace exchanges

Table 7.7 Types of B2B marketplaces identified by Kaplan and Sawhney (2000)with examplesSource: Adapted and reprinted by permission of Harvard Business Review from table on p. 99 from ‘E-hubs: the new B2B marketplaces,’ by Kaplan, S. and Sawhney, M., in Harvard Business Review, May–June 2000. Copyright © 2000 by the Harvard Business School Publishing Corporation, all rights reserved

Types of marketplace